** **

**UNITEDSTATESSECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

 

----

 

**Form10-QSB**

 

----

 

**ý****QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934**

**For the Quarterly Period Ended March 31, 2004**

 

**or**

**o****TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934**

 

**Commission File Number 0-49750**

 

----

 

| **OCEAN  RESOURCES, INC.**                                                          |
|-------------------------------------------------------------------------------------|
| (Exact  name of registrant as specified in its charter)                             |
|                                                                                |   |   |
| **Delaware**                                                                        |   | **33-0857223** |
| (State  or other jurisdiction of incorporation or organization)                     |   | (I.R.S.  Employer Identification No.) |
|                                                                                |   |   |
| **2705 Canton Street**                                                              |
| **Dallas, TX  75226**                                                          |
| (Address  of principal executive offices, including zip code)                       |
|                                                                                |   |   |
| **(469) 227-7806**                                                                  |
| (Registrant’s  telephone number, including area code)                          |
|                                                                                |   |   |
| **NONE**                                                                            |
| (Former  name, former address and former fiscal year, if changed since last report) |

 

Indicate by check markwhether the registrant (1) has filed all reports required to be filed bySection 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding12 months (or for such shorter period that the registrant was required to filesuch reports), and (2) has been subject to such filing requirements for thepast 90 days.

Yes ý     No o

 

As of May 21, 2004 therewere 47,580,435 shares of the registrant’s common stock outstanding.

 

 

----

 

**ITEM I -FINANCIAL STATEMENTS**

 

**OCEAN RESOURCES, INC.**

**CONSOLIDATED BALANCE SHEETS**

**(Unaudited)**

 
|                                                                                                                                   |   | **March 31,  2004** |      | **June 30,  2003** |   |
|----------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------|-----------|--------------------|--------|
| **ASSETS**                                                                                                                             |   |                |      |               |   |
| Current Assets                                                                                                                         |   |                |      |               |   |
| Cash and cash equivalents                                                                                                              |   | $                   | 54,293    |               | $      | — |   |
| Accounts receivable                                                                                                                    |   | 6,264               |      | 538                |   |
| Prepaid expenses                                                                                                                       |   | 138,332             |      | 952                |   |
| Prepaid expenses consulting services                                                                                                   |   | 394,000             |      | —             |   |
| Prepaid expenses director fees                                                                                                         |   | 338,500             |      | —             |   |
| Prepaid expenses investor relations services                                                                                           |   | 506,713             |      | —             |   |
| Prepaid expenses management services                                                                                                   |   | 727,333             |      | —             |   |
| Total Current Assets                                                                                                                   |   | 2,165,435           |      | 1,490              |   |
| Property and equipment, net                                                                                                            |   | 3,121,678           |      | —             |   |
| Goodwill                                                                                                                               |   | 91,000              |      | —             |   |
| Prepaid expenses long-term                                                                                                             |   | 8,333               |      | —             |   |
| Total Assets                                                                                                                           |   | $                   | 5,386,446 |               | $      | 1,490 |   |
|                                                                                                                                   |   |                |      |               |   |
| **LIABILITIES  AND STOCKHOLDERS’ EQUITY (DEFICIT)**                                                                               |   |                |      |               |   |
|                                                                                                                                   |   |                |      |               |   |
| Current Liabilities                                                                                                                    |   |                |      |               |   |
| Accounts payable and accrued liabilities                                                                                               |   | $                   | 305,189   |               | $      | 485,038 |   |
| Note payable                                                                                                                           |   | 653,133             |      | —             |   |
| Bank loan                                                                                                                              |   | —              |      | 36,558             |   |
| Other liabilities                                                                                                                      |   | 55,697              |      | 23,538             |   |
| Total Current Liabilities                                                                                                              |   | 1,014,019           |      | 545,134            |   |
| Long-term note payable                                                                                                                 |   | 316,666             |      | —             |   |
| Total Liabilities                                                                                                                      |   | 1,330,685           |      | 545,134            |   |
|                                                                                                                                   |   |                |      |               |   |
| Minority interest                                                                                                                      |   | 17,917              |      | —             |   |
|                                                                                                                                   |   |                |      |               |   |
| Stockholders Equity (Deficit)                                                                                                          |   |                |      |               |   |
| Common stock, $0.0001 par value; 150,000,000 shares authorized;  47,390,435 and 27,777,892 shares issued and outstanding, respectively |   | 4,739               |      | 2,777              |   |
| Additional paid-in capital                                                                                                             |   | 7,567,183           |      | 505,601            |   |
| Redeemable preferred stock $0.001 par value, 20,000,000 shares  authorized;  1,042,000 issued                                          |   | 1,042,000           |      |               |   |
| Deferred shares to be issued                                                                                                           |   | (43,420             | )         | —             |   |
| Accumulated deficit                                                                                                                    |   | (4,532,658          | )         | (1,015,712         | )      |
| Accumulated comprehensive loss                                                                                                         |   | —              |      | (36,310            | )      |
| Total Stockholders’ Equity (Deficit)                                                                                              |   | 4,037,844           |      | (543,644           | )      |
|                                                                                                                                   |   | $                   | 5,386,446 |               | $      | 1,490 |   |

 

Seeaccompanying notes to consolidated financial statements.

 

 

2

----

 

**OCEAN RESOURCES, INC.**

**CONSOLIDATED STATEMENTS OF OPERATIONS**

**(Unaudited)**

 
|                                                              |   | **Three  Months Ended  March 31,** |       | **Nine  Months Ended  March 31,** |   |
|-------------------------------------------------------------------|--------|------------------------------------|------------|-----------------------------------|--------|
|                                                              |   | **2004**                           |       | **2003**                          |   | **2004** |   | **2003** |   |
| Revenue                                                           |   | $                                  | 27,565     |                              | $      | — |   | $ | 36,434 |   | $ | 525,069 |   |
| Cost of sales                                                     |   | 141,473                            |       | 354                               |   | 166,995 |   | 471,837 |   |
| Gross profit (loss)                                               |   | (113,908                           | )          | (354                              | )      | (130,561 | ) | 53,232 |   |
|                                                              |   |                               |       |                              |   |   |   |   |   |
| Operating expenses:                                               |   |                               |       |                              |   |   |   |   |   |
| Selling general and administrative                                |   | 1,856,441                          |       | 143,432                           |   | 3,157,172 |   | 379,681 |   |
| Depreciation                                                      |   | 97,926                             |       | 3,618                             |   | 100,954 |   | 29,138 |   |
| Total operating expenses                                          |   | 1,954,367                          |       | 147,050                           |   | 3,258,126 |   | 408,819 |   |
| Other income (loss):                                              |   |                               |       |                              |   |   |   |   |   |
| Interest expense                                                  |   | (103,538                           | )          | —                            |   | (103,538 | ) | — |   |
| Gain on sale of fixed asset                                       |   | —                             |       | 545,451                           |   | — |   | 545,451 |   |
| Total other income (loss)                                         |   | (103,538                           | )          | 545,451                           |   | (103,538 | ) | 545,451 |   |
| Minority interest                                                 |   | 9,811                              |       | —                            |   | 12,343 |   | — |   |
| Net income (loss)                                                 |   | $                                  | (2,162,002 | )                                 | $      | 398,047 |   | $ | (3,479,882 | ) | $ | 189,864 |   |
|                                                              |   |                               |       |                              |   |   |   |   |   |
| Foreign currency translation adjustment  reclassified to net loss |   | —                             |       | —                            |   | (36,310 | ) | — |   |
| Foreign currency translation gain (loss)                          |   | —                             |       | 12,025                            |   | (754 | ) | (9,804 | ) |
| Comprehensive income (loss)                                       |   | $                                  | (2,162,002 | )                                 | $      | 410,072 |   | $ | (3,516,946 | ) | $ | 180,060 |   |
|                                                              |   |                               |       |                              |   |   |   |   |   |
| Loss per common share:                                            |   |                               |       |                              |   |   |   |   |   |
| Basic and diluted                                                 |   | $                                  | (.06       | )                                 | $      | 0.02 |   | $ | (.11 | ) | $ | 0.01 |   |
| Weighted average shares:                                          |   |                               |       |                              |   |   |   |   |   |
| Basic and diluted                                                 |   | 38,678,473                         |       | 25,008,407                        |   | 32,175,011 |   | 25,008,407 |   |

 

Seeaccompanying notes to consolidated financial statements.

 

3

----

 

**OCEAN RESOURCES, INC.**

**CONSOLIDATED STATEMENTS OF CASH FLOWS**

**(Unaudited)**

 
|                                                                           |   | **Nine  Months Ended  March 31,** |       |
|--------------------------------------------------------------------------------|--------|-----------------------------------|------------|
|                                                                           |   | **2004**                          |       | **2003** |   |
| Cash Flows From Development Activities:                                        |   |                              |       |   |   |
| Net income (loss)                                                              |   | $                                 | (3,516,946 | ) | $ | 189,864 |   |
| Adjustments to reconcile net loss to net  cash used in development activities: |   |                              |       |   |   |
| Common stock issued for services                                               |   | 2,529,094                         |       | — |   |
| Depreciation and amortization                                                  |   | 100,954                           |       | 29,138 |   |
| Cumulative translation loss expense                                            |   | 36,310                            |       | — |   |
| Reclassification of accounts payable and  accrued expenses                     |   | 363,644                           |       | — |   |
| (Gain) loss on sale of fixed assets                                            |   | —                            |       | (545,451 | ) |
| Minority interest                                                              |   | 17,917                            |       | — |   |
| Other                                                                          |   | 22,344                            |       | — |   |
| Change in assets and liabilities:                                              |   |                              |       |   |   |
| (Increase) decrease in accounts receivable                                     |   | (5,726                            | )          | 538 |   |
| (Increase) decrease in prepaid expenses                                        |   | (137,380                          | )          | — |   |
| Increase (decrease) in accounts payable and  accrued expenses                  |   | (179,849                          | )          | 298,626 |   |
| (Increase) decrease in other assets                                            |   | (99,333                           | )          | — |   |
| Increase (decrease) in other liabilities                                       |   | (4,399                            | )          | — |   |
| Net Cash Used In Development Activities                                        |   | (873,370                          | )          | (27,285 | ) |
|                                                                           |   |                              |       |   |   |
| Cash Flows From Investing Activities:                                          |   |                              |       |   |   |
| Capital expenditures                                                           |   | (189,920                          | )          | — |   |
| Net Cash Used In Investing Activities                                          |   | (189,920                          | )          | — |   |
|                                                                           |   |                              |       |   |   |
| Cash Flows From Financing Activities:                                          |   |                              |       |   |   |
| Issuance of common stock                                                       |   | 554,983                           |       | — |   |
| Proceeds from short-term loan                                                  |   | —                            |       | 32,080 |   |
| Issuance of preferred stock                                                    |   | 155,000                           |       | — |   |
| Sale of convertible notes                                                      |   | 300,000                           |       | — |   |
| Sale of warrants                                                               |   | 7,500                             |       | — |   |
| Proceeds from sale of participation  agreement                                 |   | 100,000                           |       | — |   |
| Other                                                                          |   | 100                               |       | — |   |
| Net Cash Provided By Financing Activities                                      |   | 1,117,583                         |       | 32,080 |   |
|                                                                           |   |                              |       |   |   |
| Effect of Exchange Rate Changes on Cash                                        |   | —                            |       | (11,484 | ) |
| Net Change In Cash                                                             |   | 54,293                            |       | (6,689 | ) |
|                                                                           |   |                              |       |   |   |
| Cash and Cash Equivalents:                                                     |   |                              |       |   |   |
| Beginning of period                                                            |   | —                            |       | 6,689 |   |
| End of period                                                                  |   | $                                 | 54,293     |   | $ | — |   |

 

Seeaccompanying notes to consolidated financial statements.

 

4

----

 

**Ocean Resources, Inc.**

**Notes to Consolidated Financial Statements**

**(Unaudited)**

 

(1)                          Summary of Significant Accounting Principles

 

a)              *Basis of Presentation:* The unaudited consolidated financialstatements of Ocean Resources, Inc. (the “Company”) include all adjustments,which include only normal recurring adjustments, which are, in the opinion ofmanagement, necessary to present fairly the results of operations of theCompany for the interim periods presented. The unaudited financial statementsshould be read in conjunction with the consolidated financial statements andnotes thereto in the Company’s Form 10-KSB for the fiscal year ended June 30,2003, filed with the Securities and Exchange Commission. The results ofoperations for the three and nine month periods ended March 31, 2004 are notnecessarily indicative of the results of operations for the entire year endingJune 30, 2004. Certain amounts from prior periods have been reclassifiedto conform with the period ended March 31, 2004 presentation.

 

The following summarize themore significant accounting and reporting policies and practices of the Company:

 

*b)    Use of estimates:* In preparing the consolidated statements,management is required to make estimates and assumptions that affect thereported amounts of assets, liabilities, revenue and expenses for the three andnine months ended March 31, 2004. Actual results may differ significantly fromthose estimates.

 

*c)**            **Principles of consolidation:* The consolidated financial statementsinclude the accounts of the Company and its subsidiaries.  The Company’s wholly-owned subsidiariesinclude Caribbean Exploration, Inc., a Texas corporation, Blue OceanTechnologies, L.L.C., a Texas limited liability company and Marine GroupInternational, Inc., a Panamanian company. Titanic Explorations, Ltd., a British Virgin Islands company, is awholly-owned subsidiary of Caribbean Exploration, Inc. Titanic Explorations isa 50% joint venture participant in International Recovery Group, LLC, a Nevislimited liability company established for the purpose of locating andrecovering valuable cargo from various shipwrecks. Blue Ocean Technologies,L.L.C. has a 90% interest in Blue Ocean Wireless Communications, L.L.C., aTexas company. Inter-company balances and transactions have been eliminated.

 

d)             *Earnings (loss) per share:* Net loss per share Basic is computed bydividing the net loss by the weighted average number of common sharesoutstanding during the period. Diluted earnings per share include the effect ofdilutive securities such as stock options and warrants. Warrants outstanding atMarch 31, 2004 are exercisable for 1,325,000 shares. Such warrants are excludedfrom the computation of diluted earnings per share due to the Company incurringa net loss for the periods presented.

 

e)              *Foreign currencytransaction and translation gains (losses)*: The principal operations of the Company are located in the UnitedKingdom, therefore the Company is subject to transaction gains and losses. TheCompany’s reporting currency is the United States dollar.

 

f)                *Comprehensive income:* The Company reports comprehensive income inaccordance with FASB Statement No. 130. “Reporting Comprehensive Income”. Thisstatement establishes standards for reporting comprehensive income in financialstatements. Material components of Accumulated Other Comprehensive Income mustalso be disclosed. This statement only modifies disclosures, includingfinancial statement disclosures, and does not result in other changes to theresults or financial position of the Company. Accordingly, Comprehensive Incomeis included in the Statement of Operations, while Accumulated OtherComprehensive Loss is included in the Shareholders’ Deficit section of theBalance Sheet. Amounts are reported net of tax and include gains and losses onforeign currency translation adjustments.

 

g)             *Recent Accounting Standards*:  TheCompany has adopted the provisions of Financial Accounting Standards Board No.150 “Accounting for certain Financial Instruments with Characteristics of bothLiabilities and Equity” in accounting for its redeemable preferred stock.  As such, the Company has recorded the fairvalue of its issued redeemable preferred stock as equity in the Company’sconsolidated balance sheet.

 

(2)                         *Significant acquisitions:*On December 31, 2003, the Company enteredinto an agreement to acquire 100% of the membership interest of Marine Group International,Inc., a Panamanian company with ownership rights to the Ocean Boomer vessel andremotely operated vehicle (“ROV”), in exchange for 4,107,500 shares of commonstock, 587,000 shares of Series A preferred stock, and a promissory note in theamount of $950,000. On December 1, 2003, the Company entered into an agreementto acquire 100% of the membership interest of Blue Ocean WirelessCommunications, LLC, a Texas company (“BOW”), and prepaid certain managementand consulting services in connection with such company in exchange for 350,000shares of restricted stock and 350,000 shares of free-trading S-8 common stock.This acquisition was effected through Blue Ocean Technologies, LLC (“BOT”), awholly owned subsidiary. As part of the acquisition, a 10% interest plusdepreciation expense up to $100,000 per year in BOW was contributed to OutbackManagement Services, LLC

 

 

5

----

 

(“Outback”), which willprovide management services to BOW. The Company issued an additional 167,000shares of S-8 common stock, to be held by BOT, as compensation for servicesrendered to the Company.

 

(3)                          *Divestitures:*  OnDecember 31, 2003, the Company entered into an agreement to sell 100% of theissued and outstanding shares of its subsidiary, Danepath Limited, a UnitedKingdom company, to SAS, Ltd., a Nevis limited liability company, in exchangefor $1.00. The Company has indemnified the buyer and Mr. Graham Jessop, adirector of the Company, against any loss or liability from this transaction.

 

(4)                          *Stockholders’ Equity*: During the third quarter ended March 31,2004, the Company sold 1,963,327 shares of common stock for proceeds of$260,000. The Company also sold 35,000 shares of Series B preferred stock forproceeds of $35,000, and 20,000 shares of Series C preferred stock for proceedsof $20,000. The Series B preferred stock is redeemable for warrants having theright to purchase an equivalent number of shares of common stock at an exerciseprice of $0.10 per share. Purchasers of Series C preferred stock acquiredwarrants having the right to purchase an equivalent number of shares of commonstock at an exercise price of $0.10 per share. Also during the quarter, theCompany issued the remaining 1,500 shares of the 4,107,500 shares of commonstock and 587,000 shares of Series A preferred stock in connection with theacquisition of the Ocean Boomer vessel and ROV as noted in the Company’s 10-QSBfor the quarter ended December 31, 2003. Such shares of Series A preferredstock are redeemable for warrants having the right to purchase an equivalentnumber of shares of common stock at an exercise price of $0.40 per share. TheCompany also issued 300,000 shares of Series A preferred stock upon theconversion of $300,000 principal amount of convertible notes as noted in theCompany’s 10-QSB for the quarter ended December 31, 2003.  Such shares of Series A preferred stock areredeemable for warrants having the right to purchase an equivalent number of sharesof common stock at an exercise price of $0.10 per share.  TheCompany also issued during the third quarter ended March 31, 2004, an aggregateof 867,000 shares of common stock in connection with the acquisition of BlueOcean Wireless Communications, LLC as noted in the Company’s 10-QSB for thequarter ended December 31, 2003. The Company issued an additional 525,000shares to Blue Ocean Wireless Communications to be used as compensation forservices to be rendered.

 

During the third quarter,the Company issued to Argosy International an aggregate of 1,950,000 shares ofcommon stock in partial settlement of a note payable, accrued salaries andexpenses, and past services as noted in the Company’s 10-QSB for the quarterended December 31, 2003. The Company also issued 550,000 shares of common stockto Argosy International as partial payment for intellectual property rightsattached to certain wrecks in the North Atlantic. Mr. Graham Jessop, an officerand director of the Company, is also a director and shareholder in ArgosyInternational.

 

During the quarter endedMarch 31, 2004, the Company issued 300,000 shares of common stock to each ofits three outside directors in consideration of future services as boardmembers, and 1,000,000 shares to MAC Partners, LLC in consideration of servicesrendered and to be rendered with regard to preparation of a Private PlacementMemorandum and management of retail and institutional investments. MAC Partnersreceived an additional 1,500,000 shares of common stock in consideration of itsservices in the acquisition of the Ocean Boomer vessel and ROV. The Companyalso issued to MAC Partners 1,900,000 shares of common stock in lieu of cashpayment for services rendered during February and March 2004, and to berendered during April 2004, and an additional 500,000 shares of common stockfor ship management services. Also during the quarter ended March 31, 2004, theCompany issued 1,048,220 shares of common stock to holders of salvageparticipation certificates as noted in the Company’s 10-QSB for the quarterended December 31, 2003. Other common stock issuances during the third quarterended March 31, 2004 include 37,000 shares to a crew member in lieu of wages,an additional 350,000 shares to this same individual for future services, anaggregate of 1,912,000 shares to investor relations companies in considerationof current and future services, 150,000 shares in consideration of future legalservices, and 1,000,000 shares of common stock in consideration for futureconsulting services related to marine equipment acquisitions and contracts.

 

(5)                          *Note Payable:*During the quarter ended December 31, 2003,the Company issued a promissory note in the principal amount of $950,000 aspart of the purchase price for the Ocean Boomer vessel and ROV. The note bearsinterest at 7% per annum and is due no later than June 30, 2005.

 

6

----

 

(6)                          *Goodwill:* In connection with the acquisition of BOW,the Company used the purchase method of accounting for business combinationsand recognized an excess of $91,000 of cost over the purchase amounts assignedto assets acquired and liabilities assumed.

 

(7)                          *Minority Interest:*In connection with the acquisition of BOW theCompany recorded minority interest to reflect the 10% interest of OutBack inBOW.  The 10% minority interest plusdepreciation is reflected in the Company’s consolidated statement of operationsas income of $12,343.  The relatedliability of $17,917 is reflected in the Company’s consolidated balance sheet.

 

(8)                          *Warrants:* In January, 2004 the Company sold to aninvestor a warrant to purchase 170,000 shares of common stock at $0.075 pershare. The warrant may be exercised at the option of the investor at any timefollowing the first exercise date of January 10, 2005 until its expiration onJanuary 10, 2007. In conjunction with the purchase of Series B and Series Cpreferred stock, the Company issued to investors warrants to purchase 155,000shares of common stock at $0.10 per share.

 

(9)                          *Participation Certificates:*During the quarter endedMarch 31, 2004, the Company converted $100,000 of salvage participationcertificates to 1,048,220 shares of common stock.

 

(10)                    *Going Concern:*The accompanying financial statements havebeen prepared on a going-concern basis, which contemplates the realization ofassets and the satisfaction of liabilities in the normal course of business.The Company has not been profitable since inception. The ability of the Companyto continue as a going concern is dependent upon commencing profitableoperations and obtaining additional capital and financing. The Company expectsto raise additional funds via a private placement of either equity or debt. Thefinancial statements do not include any adjustments that might be necessary ifthe Company is unable to continue as a going concern.

 

(11)                    *Supplemental Disclosure ofCash Flow Information:*Cashflows from developmental activities include a number of significant non-cashtransactions.  Non-cash transactions forthe nine months ended March 31, 2004 include the acquisition of the OceanBoomer vessel and ROV for stock and notes payable valued at $2,768,800, commonstock issued for services valued at an aggregate of $2,529,000, the conversionof debt to equity for $430,000, and goodwill attributable to the acquisition ofBlue Ocean Technologies, L.L.C. for $91,000.

 

(12)                    *Subsequent Events:*On April 6, 2004, the Company announced thatit has authorized the issuance of a stock dividend to stockholders of record asof April 13, 2004. Each holder of OCRI common stock as of the record date isentitled to receive shares of Caribbean Exploration, Inc. (CEI), a wholly ownedsubsidiary of the Company, on a one-for-one basis. CEI owns TitanicExplorations, Ltd., which is a fifty percent partner with Ruby Mining Company,Inc. in International Recovery Group, LLC, a marine salvage enterprise governedunder the laws of Nevis.

 

During the month of April,2004, the Company sold 2,596,667 shares of common stock and 1,817,667 warrantsfor proceeds of $389,500.

 

**Item 2.Management’s Discussion and Analysis**

 

General

 

Certain statements containedin this quarterly filing, including, without limitation, statements containingthe words “believes”, “anticipates”, “expects” and words of similar import,constitute forward-looking statements. Such forward-looking statements involveknown and unknown risks, uncertainties and other factors that may cause theactual results, performance or achievements of the Company, or industryresults, to be materially different from any future results, performance or achievementsexpressed or implied by such forward-looking statements.

 

Such factors include, amongothers, the following: international, national and local general economic andmarket conditions: demographic changes; the ability of the Company to sustain,manage or forecast its growth; the ability of the Company to successfully makeand integrate acquisitions; raw material costs and availability; new productdevelopment and introduction; existing government regulations and changes in,or the failure to comply with, government regulations; adverse publicity;competition; the loss of significant customers or suppliers; fluctuations anddifficulty in forecasting operating results; changes in business strategy ordevelopment plans; business disruptions; the ability to attract and retainqualified personnel; the ability to protect technology; and other factorsreferenced in this and previous filings.

 

7

----

 

Given these uncertainties,readers of this Form 10-QSB and investors are cautioned not to place unduereliance on such forward-looking statements. The Company disclaims anyobligation to update any such factors or to publicly announce the result of anyrevisions to any of the forward looking statements contained herein to reflectfuture events or developments.

 

The Company is a developmentstage company and does not derive a significant revenue stream from ongoingoperations. Therefore the Company does not have a significant ongoing revenuestream that may tend to mitigate quarterly and annual fluctuations in operatingresults. Although the Company will attempt to broaden its sources of income,increases in the Company’s revenue will be primarily dependent on its abilityto implement successfully its deep ocean research, exploration, survey, andrecovery strategy.  There also may beother factors that significantly affect the Company’s quarterly and annualoperating results, which are difficult to predict given the Company’s limitedoperating history.  The Company’s commonstock is presently quoted on the Over the Counter Bulletin Board. Its executiveoffices are presently located at 2705 Canton Street, Dallas, Texas 75226.

 

**Results ofOperations**

 

**Three MonthPeriod Ending March 31, 2004 Compared to the Three Month Period Ended March 31,2003**

 

**Revenue-**The Company recognized revenue of $27,565 atMarch 31, 2004 from telecommunication service subscriptions and installationfees related to its acquisition of BOW. There were no revenues from thecomparative period, March 31, 2003.

 

**GrossProfit-**Gross profitdecreased from ($354) to ($113,908). The primary reason for the decrease ingross profit is expenditures related to vessel operations, including crew,port, fuel, and license fee expenses.

 

**Selling,General and Administrative Expenses-**Selling, general and administrative expenses increased significantly to$1,856,441 in 2004 from $143,432 in 2003. This increase is primarily related tonon-cash issuances of common stock for payment of management services, directorfees, professional fees and investor relation expenses totaling $1,508,000,legal expenses of $86,000, commissions and fees of $30,000 related to theCompany’s private placement financing efforts, and $30,000 for sales andmarketing.

 

**OtherIncome (Loss)**- Otherincome decreased from $545,451 in 2003 to ($103,538) in 2004. The loss in 2004is attributable to interest expense of $103,538. The gain in 2003 is the resultof the disposal of certain fixed assets pursuant to a Settlement Agreement related to Danepath, Ltd., a whollyowned subsidiary of the Company.

 

**Nine MonthPeriod Ending March 31, 2004 Compared to the Nine Month Period Ended March 31,2003**

 

**Revenue-**The Company recognized revenue of $36,434 atMarch 31, 2004 from telecommunication service subscriptions and installationfees related to its acquisition of BOW. Revenue from the comparative period, of$525,069, resulted from use of the vessel SV Explorer, formerly owned by theCompany.

 

**GrossProfit-**Gross profitdecreased from 10% to (358%). The primary reason for the decrease in grossprofit relates to a significant decrease in revenue caused by vessel activityin 2003, which did not recur in 2004. Cost of sales decreased 65% from $471,837to $166,995 due primarily to decreased vessel expenses.

 

**Selling,General and Administrative Expenses-**Selling, general and administrative expenses increased significantly to$3,157,172 in 2004 from $379,681 in 2003. This increase is primarily related tonon-cash issuances of common stock for payment of management services, directorfees, professional fees and investor relation expenses totaling $2,529,000,legal fees of $127,000, commissions and fees of $30,000 related to theCompany’s private placement financing efforts, and $54,000 for sales andmarketing.

 

**OtherIncome (Loss)**- Otherincome decreased from $545,451 in 2003 to ($103,538) in 2004. The loss in 2004is attributable to interest expense of $103,538. The gain in 2003 is the resultof the disposal of certain fixed assets pursuant to a Settlement Agreement related to Danepath, Ltd., a whollyowned subsidiary of the Company.

 

**Liquidityand Capital Resources**

 

Cash and cash equivalentsincreased by $54,293 for the nine months ended March 31, 2004 compared to a$6,689 decrease for the nine months ended March 31, 2003. The major componentsof these changes are discussed below:

 

**Cash FlowsFrom Development Activities-**Net cash used in development activities was $873,370 at March 31, 2004,compared to net cash used in development activities of $27,285 at March 31,2003. The increase in cash used from development activities resulted from asignificant increase in net loss offset by common stock issued for services anda reclassification of accounts payable and accrued expenses.

 

8

----

 

**Cash FlowsFrom Investing Activities-**  Cash flows used in investingactivities was $189,920 for the purchase of computer equipment, officefurniture, and vessel retrofit in addition to investment in the Company’s BlueOcean Wireless subsidiary. The Company had no cash flows from investingactivities during the nine months ended March 31, 2003.

 

**Cash FlowsFrom Financing Activities-**Cash flows provided by financing activities were $1,117,583 during thenine months ended March 31, 2004, primarily due to proceeds from the sale ofconvertible notes, issuance of common stock, sale of preferred stock and saleof stock participation agreements. Cash flows provided by financing activitieswere $32,080 for the nine months ended March 31, 2003 due to proceeds from ashort-term loan.

 

**LiquidityPlan**

 

There can be no assurancethat the Company’s financial condition will improve. The Company is expected tocontinue to have minimal working capital or a working capital deficit as aresult of current liabilities. The Company is currently evaluating its optionsfor raising additional working capital via a private placement of either debtor equity.

 

During the first nine monthsended March 31, 2004, the Company was able to raise through private placements$1,017,500. Common stock accounted for $555,000, preferred stock for $155,000,convertible notes converted into preferred stock for $300,000, stockparticipation agreements for $100,000, and warrants for $7,500.

 

**Researchand Development Plans**

 

There are no plans for researchand development in the foreseeable future, nor are any expenses in connectionwith research and development expected.

 

**Forward-LookingStatements**

 

This Form 10-QSB includes“forward-looking statements.” All statements, other than statements of historicalfacts, included or incorporated by reference in this Form 10-QSB, which addressactivities, events or developments which the Company expects or anticipateswill or may occur in the future, including such things as future capitalexpenditures (including the amount and nature thereof), finding suitable mergeror acquisition candidates, expansion and growth of the Company’s business andoperations, and other such matters are forward-looking statements. Thesestatements are based on certain assumptions and analyses made by the Company inlight of its experience and its perception of historical trends, currentconditions and expected future developments as well as other factors itbelieves are appropriate in the circumstances. However, whether actual results ordevelopments will conform with the Company’s expectations and predictions issubject to a number of risks and uncertainties, general economic market andbusiness conditions; the business opportunities (or lack thereof) that may bepresented to and pursued by the Company; changes in laws or regulation; andother factors, most of which are beyond the control of the Company.Consequently, all of the forward-looking statements made in this Form 10-QSBare qualified by these cautionary statements and there can be no assurance thatthe actual results or developments anticipated by the Company will be realizedor, even if substantially realized, that they will have the expectedconsequence to or effects on the Company or its business or operations. TheCompany assumes no obligations to update any such forward-looking statements.

 

**Item 3.Controls and Procedures**

 

Based on the evaluation ofthe Company’s disclosure controls and procedures as of the end of the periodcovered by this quarterly report, Dennis McLaughlin, III, the President andChief Executive Officer, and Steven Sanit, the Chief Financial Officer, haveconcluded that, in their judgment, the Company’s disclosure controls andprocedures are designed to ensure that material information relating to the Company,including the Company’s subsidiaries, is accumulated and communicated to theCompany’s management, including its principal executive and financial officersof the Company or its subsidiaries, to allow timely decisions regardingrequired disclosure.  Managementnecessarily applied its judgment in assessing the costs and benefits of suchcontrols and procedures, which, by their nature, can provide only reasonableassurance regarding management’s control objectives.  The design of any system of controls and procedures is based inpart upon certain assumptions about the likelihood of future events.  There can be no assurance that any designwill succeed in achieving its stated goals under all potential future conditions,regardless of how remote.

 

There were no significantchanges in the Company’s internal controls or in other factors that couldsignificantly affect these controls subsequent to the date of their evaluation,including any corrective actions with regard to significant deficiencies andmaterial weaknesses.

 

9

----

 

**PART II**

 

**Item 1.Legal Proceedings.**

 

The Company is involved invarious claims and other legal matters initiated by the Company in the courseof conducting its business.  The Companybelieves that neither such claims and legal matters nor the cost of prosecutingand/or defending such claims and legal matters will have a material adverseeffect on the Company’s consolidated results of operations, financial conditionor cash flows.  No material claims arecurrently pending; however, no assurances can be given that future claims, ifany, may not be material.

 

**Item 2.Changes in Securities and Use of Proceeds**

 

During the nine months endedMarch 31, 2004, the Company has issued 3,442,494 shares of Common Stock for$555,000 in cash, 300,000 shares of Series A Preferred Stock for $300,000 incash, 135,000 shares of Series B Preferred Stock for $135,000 in cash, and20,000 shares of Series C Preferred Stock for $20,000 in cash.  Warrants outstanding at March 31, 2004 areexercisable for 1,325,000 shares of common stock.  The securities have been issued pursuant to the exemptionprovided by Section 4(2) of the Securities Act of 1933.  The purchasers of these securities areaccredited investors who made informed investment decisions and had access tomaterial information regarding the Company. The certificates representing thecommon and preferred shares, and warrants, bear appropriate legends restrictingthe transfer of such securities.

 

**Item 3.Defaults in Senior Securities**

 

None.

 

**Item 4.Submission of Matters to a Vote of Security Holders.**

 

No matter was submittedduring the quarter ending March 31, 2004, covered by this report, to a vote ofthe Company’s shareholders, through the solicitation of proxies or otherwise.

 

**Item 5.Other Information**

 

None

 

**Item 6.Exhibits and Reports on Form 8-K**

 

(a) The exhibits required tobe filed herewith by Item 601 of Regulation S-B, as described in the followingindex of exhibits, are incorporated herein by reference, as follows:

 
| **Exhibit No.** |   |   | **Description**                                       |
|-----------------|--------|--------|-------------------------------------------------------|
| 3.3             |   |   | Certificate of Stock  Designation dated January 2004. |
| 3.4             |   |   | Certificate of Stock  Designation dated March 2004.   |

 
| 31.1 |   |   | Certification pursuant to  Section 302 of the Sarbanes-Oxley Act of 2002. |
|------|--------|--------|---------------------------------------------------------------------------|
| 31.2 |   |   | Certification pursuant to  Section 302 of the Sarbanes-Oxley Act of 2002. |
| 32.1 |   |   | Certification pursuant to  Section 906 of the Sarbanes-Oxley Act of 2002. |
| 32.2 |   |   | Certification pursuant to  Section 906 of the Sarbanes-Oxley Act of 2002. |

 
|   |   | (b)    Reports  on Form 8-K for the quarter ended March 31, 2004: |
|--------|--------|---------------------------------------------------------------------------------------|

 
| **Date of Filing** |   | **Subject**                                                                                                                                                                                                                                |
|--------------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| January 14, 2004   |   | Press release announcing  the formation of Blue Ocean Technologies, LLC, a technology based company  designed to evaluate, procure, and deploy broadband technologies for the  advancement of deep water research and recovery operations. |
| February 4, 2004   |   | Press release announcing  the acquisition of the recovery vessel, Ocean Boomer, and the Abyssub 5000, a  remotely operated vehicle.                                                                                                        |

 

10

----

 

**SIGNATURES**

 

Pursuant to the requirementsof the Securities Exchange Act of 1934, the registrant has duly caused thisreport to be signed on its behalf by the undersigned thereunto duly authorized.

 
|       | **Ocean Resources, Inc.** |   |
|------------|---------------------------|--------|
| Registrant |
|       |                      |
|       | May 24, 2004              |   |   |   | /s/ Dennis McLaughlin III |   |   |
|       | Date                      |   |   | Dennis  McLaughlin III |   |
|       |                      |   |   | Chief  Executive Officer |   |
|       |                      |   |   |   |   |
|       |                      |   |   |   |   |
|       | May 24, 2004              |   |   |   | /s/ Steven Sanit |   |   |
|       | Date                      |   |   | Steven  Sanit |   |
|       |                      |   |   | Chief  Financial  Officer |   |
|            |                           |        |  |  |  |  |  |  |  |  |  |  |

 

11

----